Financial Times

ComBank profits up despite rise in VAT
Pre-tax profits of the Commercial Bank of Ceylon Ltd, for the nine months to September 30, 2004 grew by 71 percent to Rs. 1.9 billion at the end of the third quarter of the year despite the increase in special VAT from 10 to 15 percent this year. Post-tax profits of the Bank totalled Rs. 1.3 billion, according to a Bank statement on the results released to the media last week.

Commercial Bank's Deputy General Manager - Finance & Planning, Ranjith Samaranayake said that these noteworthy increases in the Bank's pre and post tax profits were facilitated by many factors. The contribution from the Bank's Bangladesh operations in 2004, which was not in the books in 2003, was one.

He said the Bank's continued ability to maintain its growth momentum, judicious fund management, cost efficiency and improved credit quality had contributed immensely to its success.

Total deposits increased to Rs. 89.6 billion during the period under review, reflecting a growth of Rs. 14.4 billion or a percentage growth of 19.17. Exchange profit which was adversely affected by the appreciating Rupee against the US Dollar in the third quarter of last year, increased to Rs. 707 million in 2004 recording a growth of Rs. 535 million or 310 percent, partly due to the depreciation of the rupee against the US dollar during the period under review.

The Bank made adequate provisions for loan losses which include the additional provisions required to be made under the Central Bank's new "Hair Cut Rule" which came into effect from January 2004, Samaranayake said. Total loan loss provisions made for the period amounted to Rs. 580 million as against Rs. 379.2 million for the corresponding period last year. However, the net charge to the income statement was only Rs. 495.1 million as a result of an excess provision of Rs. 84.9 million against lease receivables being released in the first quarter of the year to fall in line with accepted market practices in provisioning for the business of leasing, he explained.

After providing for an enhanced tax liability of Rs 660.9 million, the profit of the Commercial Bank Group increased by Rs 131.2 million to Rs 1.270 billion which is an increase of 11.51 percent.

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